Chicago expected to raise minimum wage for tipped workers

CHICAGO (NewsNation) — Chicago is the second-largest city in the U.S. expected to phase out the “tipping as wages” system, which implies restaurant employees earn a lower minimum wage to account for tips.

Restaurateurs fear that this shift could significantly impact the city’s 7,000 restaurants, placing added financial burden on restaurant owners to increase staff compensation. However, city leaders emphasize the need for restaurants to increase hourly rates to ensure their staff can earn a livable wage.

“Currently, tipped workers receive only 60% of the minimum wage, and this has meant the tip workers have lived in poverty,” said Chicago Alderman Carlos Ramirez-Rosa. “This has meant the tip workers have been subjected to workplace abuse and harassment.”

Following a heated debate, a Chicago City Council committee approved the “One Fair Wage” ordinance to increase pay for tipped workers last month.

Saru Jayaraman, the president of One Fair Wage, highlighted that many of the workers in the restaurant industry are women.

“This would allow them to feed their children, this would allow them the stability of a wage without having to say sometimes it’s a lot sometimes it’s a little depending on the shift,” Jayaraman said. “So they’d be able to pay their rent, feed their children.”

With One Fair Wage, Chicago workers who rely on tips would be paid Illinois’ minimum wage of $15.80 and be allowed to keep what they earn in tips.

Currently, Chicago’s restaurant owners pay as low as $9.48 an hour, expecting tips to make up the difference with a so-called “tip credit.”

In California, tip credits were banned in 1976, and more states have followed suit in recent years.

The “One Fair Wage” movement has gained momentum in Massachusetts, Michigan, New York, and Maine.

While it’s an advantage for workers, some small business owners argue it could lead to layoffs and more expensive menu items to maintain profitable restaurants.

“If all of a sudden you’re paying employees 20, 30, 40 percent more, does that mean you have to cut back the amount of servers you have on a given shift,” said Dominick Purnomo, a small business owner.

The Chicago City Council is expected to vote on the ordinance Tuesday; however, officials announced Tuesday that it was delayed following an error by City Clerk Ana Valencia’s office, WTTW reports.

The earliest officials could vote on the issue, which was crafted by Mayor Brandon Johnson and backed by the Illinois Restaurant Association, would be Friday. The changes would go into effect starting July 2024.